Expedition Helicopters Inc. v. Honeywell Inc.
100 O.R. (3d) 241
2010 ONCA 351
Court of Appeal for Ontario,
O'Connor A.C.J.O., Gillese and Juriansz JJ.A.
May 14, 2010
Conflict of laws -- Forum selection clause -- Court required to give effect to forum selection clause in commercial contract unless plaintiff shows strong cause that case is exceptional -- Motion judge erring in conducting forum non conveniens analysis in which she regarded forum selection clause as merely one factor to be considered.
The defendant (a Delaware corporation that operates globally) supplied a helicopter engine to the plaintiff, an Ontario corporation. A forum selection clause in the Bailment Agreement provided that the agreement was to be governed, controlled and interpreted under the law of the State of Arizona and that the federal court located in Phoenix, Arizona was to have exclusive jurisdiction to hear any action arising out of the agreement. The engine was installed in a helicopter that crashed in Saskatchewan. The plaintiff commenced an action against the defendant in Ontario. The defendant brought a motion to enforce the forum selection clause. The motion was dismissed. The defendant appealed.
Held, the appeal should be allowed.
A forum selection clause in a commercial contract should be given effect unless the plaintiff shows strong cause that the case is exceptional. It is not enough for the plaintiff to establish a strong case that Ontario is the more convenient forum. The motion judge erred in conducting a forum non conveniens analysis in which she regarded the forum selection clause as but one factor to be considered, and a subsidiary one at that. She did not give full weight to the clause and she did not consider the effect it had on the factors relevant to the forum non conveniens analysis. In the circumstances of this case, there was no reason to depart from the presumption that the plaintiff should be held to the bargain that it made.
APPEAL from the decision of Gauthier J., [2010] O.J. No. 462, 2010 ONSC 732 dismissing a motion to enforce a forum selection clause.
Cases referred to Z.I. Pompey Industrie v. ECU-Line N.V., [2003] 1 S.C.R. 450, [2003] S.C.J. No. 23, 2003 SCC 27, 224 D.L.R. (4th) 577, J.E. 2003-892, 30 C.P.C. (5th) 1, 121 A.C.W.S. (3d) 793, apld Other cases referred to The "Eleftheria", [1969] 1 Lloyd's Rep. 237, [1970] P 94 (Adm. Div.) Authorities referred to Peel, Edwin, "Exclusive jurisdiction agreements: purity and pragmatism in the conflict of laws", [1998] L.M.C.L.Q. 182
Susan M. Brown, for appellant. Paul J. Pape and David S. Steinberg, for respondent. [page242]
The judgment of the court was delivered by
JURIANSZ J.A.:-- A. Introduction
[1] Honeywell Inc. ("Honeywell") appeals from the decision of Gauthier J. dismissing its motion to enforce a forum selection clause in a Bailment Agreement (the "Agreement") by staying the action of Expedition Helicopter Inc. ("Expedition"). The Agreement related to a helicopter engine that Honeywell provided to Expedition. The Expedition helicopter in which the engine was installed crashed in northern Saskatchewan, resulting in the death of the pilot and a passenger, as well as the complete loss of the helicopter. Expedition commenced an action in Ontario for damages arising out of the crash. Honeywell brought a motion to stay the Ontario action because the Agreement provided that the courts of Arizona have exclusive jurisdiction over all proceedings "arising out of or in connection with this Agreement".
[2] I would allow the appeal. The motion judge did not state or apply the correct test for enforceability of a forum selection clause and reached the wrong result. B. Analysis
[3] Expedition is incorporated in Ontario and has its head office in Cochrane, Ontario. It operates a fleet of 11 helicopters for charter. Honeywell is a Delaware corporation which operates globally. The leased engine was manufactured in Williamsport, Pennsylvania and converted to the specific configurations required by Expedition at Honeywell's facility in Greer, South Carolina. The Greer facility is managed by a Honeywell division based in Phoenix, Arizona.
[4] The relationship between the two companies is such that the replacement engine was shipped, installed and in use before the Agreement was signed.
[5] The forum selection clause in the Agreement provided as follows:
CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED, CONTROLLED AND INTERPRETED UNDER THE LAW OF THE STATE OF ARIZONA, EXCLUDING ITS CONFLICT OR CHOICE OF LAW PROVISIONS. The parties (i) agree that any state or federal court located in Phoenix, Arizona shall have exclusive jurisdiction to hear any suit, action or proceeding arising out of or in connection with this Agreement, and consent and submit to the exclusive jurisdiction of any such court in any such suit, action or proceeding and (ii) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding to the extent permitted by the applicable law, that the suit, action or proceeding is brought in an inconvenient forum, that the [page243] venue of the suit, action or proceeding is improper, or that this Agreement or any of the transactions contemplated hereby may not be enforced in or by such courts.
(1) The test for enforceability of forum selection clauses
[6] The motion judge recognized that the Supreme Court of Canada's decision in Z.I. Pompey Industrie v. ECU-Line N.V., 2003 SCC 27, [2003] 1 S.C.R. 450, [2003] S.C.J. No. 23 is the governing authority regarding the enforcement of a forum selection clause. Pompey confirmed the exercise of the court's discretion not to enforce a forum selection clause is governed by the "strong cause" test first stated in the British case The "Eleftheria", [1969] 1 Lloyd's Rep. 237, [1970] P 94 (Adm. Div.). The test in The "Eleftheria" as quoted in Pompey, at para. 19, is as follows:
(1) Where plaintiffs sue in England in breach of an agreement to refer disputes to a foreign Court, and the defendants apply for a stay, the English Court, assuming the claim to be otherwise within the jurisdiction, is not bound to grant a stay but has a discretion whether to do so or not. (2) The discretion should be exercised by granting a stay unless strong cause for not doing so is shown. (3) The burden of proving such strong cause is on the plaintiffs. (4) In exercising its discretion the Court should take into account all the circumstances of the particular case. (5) In particular, but without prejudice to (4), the following matters, where they arise, may be properly regarded: (a) In what country the evidence on the issues of fact is situated, or more readily available, and the effect of that on the relative convenience and expense of trial as between the English and foreign Courts. (b) Whether the law of the foreign Court applies and, if so, whether it differs from English law in any material respects. (c) With what country either party is connected, and how closely. (d) Whether the defendants genuinely desire trial in the foreign country, or are only seeking procedural advantages. (e) Whether the plaintiffs would be prejudiced by having to sue in the foreign Court because they would (i) be deprived of security for that claim; (ii) be unable to enforce any judgment obtained; (iii) be faced with a time-bar not applicable in England; or (iv) for political, racial, religious or other reasons be unlikely to get a fair trial.
[7] This 1969 British test is best appreciated by what Bastarache J., writing for the Supreme Court, said about it in Pompey in 2003. Bastarache J. provided clear guidance as to how it should be understood and applied in Canada.
[8] The central thrust of the Pompey decision is that the law favours the enforcement of forum selection clauses. In a brief overview of the law, Bastarache J. observed [at para. 20] "[f] orum selection clauses are common components of international commercial transactions", they have "been applied for ages in the industry and by the courts", they "are generally to be encouraged by the courts as they create certainty and security in transaction, derivatives of order and fairness, which are critical components of private international law", and "[i]t is essential [page244] that courts give full weight to the desirability of holding contracting parties to their agreements".
[9] Bastarache J. noted that there is a similarity between a number of the factors of the test in The "Eleftheria" and those considered when applying the forum non conveniens doctrine in ordinary cases without a forum selection clause. He then went on to clearly reject the approach of considering the forum selection clause as but one factor of a conventional forum non conveniens analysis. He described [at para. 21] that kind of analysis as the "unified approach to forum non conveniens". He explained that a "different test" and "separate approach" were required. The "starting point", he said, should be [at para. 21] "that parties should be held to their bargain". Bastarache J. adopted the view of E. Peel in "Exclusive jurisdiction agreements: purity and pragmatism in the conflict of laws", [1998] L.M.C.L.Q. 182, at pp. 189-90, that the unified approach would not:
. . . ensure that full weight is given to the jurisdiction clause since not only should the clause itself be taken into account, but also the effect which it has on the factors which are relevant to the determination of the natural forum. Factors which may otherwise be decisive may be less so if one takes into account that the parties agreed in advance to a hearing in a particular forum and must be deemed to have done so fully aware of the consequences which that might have on, for example, the transportation of witnesses and evidence, or compliance with foreign procedure etc.
[10] Therefore, Bastarache J. rejected the "unified approach to forum non conveniens" in favour of a "separate approach" that [at para. 21] "ensures that these considerations are properly taken into account and that the parties' agreement is given effect in all but exceptional circumstances". He observed that [at para. 27]:
The "strong cause" test reflects the desirability that parties honour their contractual commitments and is consistent with the principles of order and fairness at the heart of private international law, as well as those of certainty and security of transaction at the heart of international commercial transactions.
[11] Thus, even though the literal wording of the test in The "Eleftheria" may imply a conventional forum non conveniens analysis, Pompey makes clear that such an analysis is not to be used. Rather, the forum selection clause pervades the analysis and must be given full weight in the consideration of other factors. It is not enough for the plaintiff to establish a "strong" case that Ontario is the more convenient forum. The plaintiff must show "strong cause" that the case is exceptional and the forum selection clause should not be enforced. [page245] (2) The motion judge's approach
[12] The motion judge in this case conducted a forum non conveniens analysis in which she regarded the forum selection clause as but one factor to be considered, and a subsidiary one at that. She did not give full weight to the clause, and she did not consider the effect it had on the factors relevant to the forum non conveniens analysis. For example, she considered the location of witnesses and the procedures of the Arizona courts without taking into account that Expedition, by agreeing to the clause, had accepted at the time it entered into the contract that it would have to transport its witnesses to Arizona and resolve any claim it might bring according to the law and procedures of Arizona. In Pompey, Bastarache J. was not satisfied that even litigation costs disproportionate to the amount of the claim was reason enough to refuse to enforce a forum selection clause.
[13] The marginal weight the motion judge placed on the clause is most evident in that part of her reasons where she sets out the argument in favour of enforcing it. There she discusses only factors relevant to forum non conveniens and does not even mention the clause. She alludes to the public policy that parties honour their contractual commitments and the principles of order and fairness at the heart of private international law only in setting out Honeywell's position and not in her analysis of the factors.
[14] The motion judge's failure to use the proper overall approach in applying the test is sufficient reason to set aside her decision. However, it may be of assistance to future cases to discuss the analysis she did conduct.
[15] The motion judge did not mention that the forum selection clause provided that "THIS AGREEMENT SHALL BE GOVERNED, CONTROLLED AND INTERPRETED UNDER THE LAW OF THE STATE OF ARIZONA." Quite to the contrary, it seems the motion judge may have assumed the case would be governed by the law of the jurisdiction in which it proceeded. She observed that the plaintiff's claim in Arizona might be dismissed because under the law of Arizona the issue would arise as to whether it had been "timely filed", and noted that in Ontario such an issue would not arise. There was no basis for the motion judge's apparent assumption that, if the case proceeded in Ontario, the law of Ontario would apply. The motion judge should have considered that the clause provided that the law of Arizona would apply.
[16] As it happens, the fresh evidence shows there is no issue of "timely filing" under the law of Arizona. Counsel for Expedition acknowledged that the expert evidence about Arizona law [page246] that Expedition filed before the motion judge was directed only to the applicable limitations period in Arizona. In any event, as counsel for Expedition recognized during argument, a party should not be able to take advantage of its own failure to bring an action in the proper jurisdiction in a timely way to create prejudice that would justify excusal from the forum selection clause.
[17] The motion judge also failed to accord sufficient weight to Expedition's commencement of an action in Arizona. She observed [at para. 34] that Expedition's action in Arizona "was instituted to preserve the claim within the limitation period". Be that as it may, instituting an action in Arizona was an act of attornment. Clearly, Expedition has conceded that the Arizona court has jurisdiction and that it is feasible that the claim proceed in Arizona.
[18] Expedition's institution of an action in Arizona raises the factor of the multiplicity of proceedings. The motion judge discounted this factor because of Expedition's undertaking to abandon the Arizona action if the Ontario action were allowed to proceed. The motion judge should have at least considered whether a judgment obtained in Ontario would be enforced by the court in Arizona if that court concluded that the action should have proceeded in Arizona. Expedition filed no evidence on this issue.
[19] The motion judge erred by attaching weight to Honeywell's concession that Ontario was the appropriate and convenient forum for the trial of the wrongful death action of the passenger in the helicopter. That action was not governed by the forum selection clause. As explained above, whether Ontario is the convenient forum is not the proper question in a case with a forum selection clause.
[20] In her analysis, the motion judge should have contrasted the jurisdictions of Arizona and Ontario. Instead, she considered the appropriateness and convenience of the claim proceeding in Arizona on the one hand and Canada on the other. For example, the fact the helicopter crashed in Saskatchewan provides little support for trying the case in Ontario.
[21] The motion judge considered significant expert evidence indicating that Canadian witnesses were beyond the reach of the Arizona court's subpoena power. She could have made the equivalent observation about the reach of the Ontario court's subpoena power in relation to American witnesses. Given the cross-border methods of obtaining evidence from friendly jurisdictions, this factor was not deserving of weight one way or the other. [page247]
[22] Finally, the motion judge set out only a portion of the test in The "Eleftheria". She omitted the portion of the test that asks whether the plaintiff would be prejudiced by having to sue in a foreign country. While some of her discussion touched on aspects of prejudice to the plaintiff, she did not consider the main concern -- whether the plaintiff could expect a fair trial in the selected forum.
[23] In this case, there is no reason to depart from the presumption that Expedition should be held to the bargain that it made. A departure is only justified in "exceptional circumstances", as Bastarache J. stressed in Pompey [at para. 21]. There is nothing exceptional about this case. As discussed above, the analysis of whether there is "strong cause" to decline to enforce a forum selection clause is not an analysis of the forum conveniens in the conventional sense. In this case, Expedition may have established that it will experience some inconvenience in the conventional sense in having to assert its claim in Arizona. That inconvenience does not justify permitting it to resile from its agreement in this commercial contract to tolerate that inconvenience.
[24] A forum selection clause in a commercial contract should be given effect. The factors that may justify departure from that general principle are few. The few factors that might be considered include the plaintiff was induced to agree to the clause by fraud or improper inducement or the contract is otherwise unenforceable, the court in the selected forum does not accept jurisdiction or otherwise is unable to deal with the claim, the claim or the circumstances that have arisen are outside of what was reasonably contemplated by the parties when they agreed to the clause, the plaintiff can no longer expect a fair trial in the selected forum due to subsequent events that could not have been reasonably anticipated, or enforcing the clause in the particular case would frustrate some clear public policy. Apart from circumstances such as these, a forum selection clause in a commercial contract should be enforced.
[25] None of these factors has been shown in this case. There was no basis to refuse the stay of proceedings. C. Conclusion
[26] I would allow the appeal, set aside the order of the motion judge and enter a stay of proceedings. The appellant's costs of the appeal are fixed in the amount of $25,000, inclusive of disbursements and GST. The appellant is entitled to its costs before the motion judge. Those costs shall be in the amount that the motion judge awarded to the respondent.
Appeal allowed.